Omaha, M.U.D. reach agreement on utility line costs along streetcar route

Officials reaffirm promise that streetcar-associated costs will not affect customers’ utility bills
A new agreement on utility costs with Omaha's streetcar plan
Published: Feb. 14, 2023 at 1:24 PM CST
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OMAHA, Neb. (WOWT) - The public dispute between Omaha’s mayor and M.U.D. is over.

The city and the Metropolitan Utilities District have reached an agreement on the utility line costs associated with the streetcar. The two sides had been bickering over who would pay the millions of dollars to replace the sewer and water lines underneath the streetcar route.

Mayor Jean Stothert’s office provided a copy signed Monday by her and Mark Doyle, M.U.D. Omaha president. The mayor’s office said in a release that M.U.D. Board Chair Tanya Cook was also part of the negotiations.

The agreement makes M.U.D. responsible for $7.6 million of the $20.5 million in funds necessary to move and replace utility lines along the streetcar route; with the city absorbing the rest of the costs into the streetcar construction budget, which is managed by the Omaha Streetcar Authority.

When the city digs up the road to put down streetcar tracks, many things like water lines and gas lines will need to be moved or replaced. That’s what the dispute has been about.

The timing of this agreement isn’t a coincidence. The deal was reached an hour before a hearing in Lincoln this afternoon. As part of the agreement, both sides agreed not to testify at Tuesday’s hearing in Lincoln — and not to say anything bad about each other in public.

But it took months — and heated words — to get to this point.

Omaha Mayor Jean Stothert and the Metropolitan Utilities District have reached an agreement concerning the forthcoming streetcar.

In December, M.U.D. board members publicly questioned how the city could authorize $360 million in bonds to build a streetcar from Midtown to downtown while only committing to paying $5 million to the utility.

M.U.D. Board Member Mike McGowan said then that “this is a streetcar system servicing a small section of Omaha, and we have to pay for it and spread the cost to everyone — including Ralston and La Vista, who will never use it?”

The utility estimated it had $20 million worth of utility lines to replace under the streetcar route; the mayor countered that since the lines were 100 years old, they would need to be replaced — with or without a streetcar.

But M.U.D. said if the costs fell solely to them, the utility would be forced to raise gas and water rates because of it. In the end, the city blinked — and agreed to pay $12.4 million instead of $5 million.

“We pledged to work with M.U.D. to find a fair compromise,” the mayor said in a news release accompanying the document. “This agreement is the result of months of negotiation to develop a cost-sharing plan for the utility work along the streetcar route and protect M.U.D.’s customers from a rate increase. I am grateful to President Doyle and Director Cook for working with us to find the right solution for everyone.”

Both the mayor and the utility have said the streetcar project would not affect M.U.D. customers’ utility rates. It will be paid through existing dollars earmarked for that sort of thing.

The board announced 2023 water and natural gas rate hikes more than two months ago — about a week ahead of the City Council’s decision on the streetcar plans — saying those were planned and not related to the utility costs associated with the streetcar.

Stothert has also promised that the streetcar can be built without a tax increase, saying that taxes created from those who want to build along the route are expected to cover it.

The Omaha streetcar line would go from 42nd and Farnam streets to downtown, using Harney Street most of the way. It would loop around The RiverFront and head to the convention center on 10th Street before heading back again on Farnam Street.

The City Council voted 6-1 in December on the $360 million bond ordinance for the streetcar. Ahead of the vote, council members wanted assurances that the streetcar project would not result in M.U.D. raising rates on customers.

“Through diligence and cooperation, we have found infrastructure that appropriately meets the guidelines of our risk assessment process. We always knew that likelihood existed,” Doyle said in the release.